In an interview to this paper this week, Bharti Enterprises Founder-Chairman Sunil Mittal said he didn’t find it difficult to let go of control and hoped his children would be “good shareholders” like him. Mittal has indeed walked the talk. While he has kept himself away from Bharti’s day-to-day operations, having passed on the baton to professional chief executive officers (CEO), his children are “doing their own things”.
Bharti, Mittal says, was designed to get out of family control and is run by professionals who are “not beholden” to him. He gives two reasons for what he calls the successful combination of an entrepreneur and a professional. One, as a promoter, he looks at the big strategy moves only, while the professional team takes all day-to-day decisions. But the second reason is more important: A promoter can take risks unlike a professional, who will be more concerned about things such as return on capital. “That’s the balance Bharti needs and Gopal Vittal (managing director and CEO) and I complement each other well,” Mittal says.
Some of Mittal’s peers in India Inc have followed the same path. Dabur, for example. Or, take Harsh Mariwala, Marico chairman, who believes family businesses will find their growth orbit restricted if they fail to professionalise in time. He has also often talked about making himself redundant in the organisation. Mariwala has had a professional CEO for quite some time now.
However, the fact is they are still in a minority, as most promoters have found letting go easier said than done. While some feel letting go means running away from responsibilities, other promoters say they have spent a lifetime creating organisations and are personally invested in them.
There is logic in both the views. Several consultants say it’s unfair to always blame a promoter whenever a tussle between a promoter and a professional has resulted in the ouster of the latter. Problems start, they say, when the CEO spends more time and energy in upgrading his profile than in upgrading the business. There are enough examples even in global companies where professional CEOs have resorted to unethical practices to record high growth. Besides, in many cases, the young breed of promoter-entrepreneurs, who have been equally well educated and exposed to global business cultures, technology, processes and trends, have outperformed CEOs.
The other school of opinion is that many semi-competent family members, ad hoc decision-making and, in extreme cases, lack of adherence to corporate governance norms or family conflicts stop promoters from professionalising their companies. There are also some cases where difficulties arise in the form of entrenched coteries of long-serving employees, who could short-circuit any proposal that can cause a radical change in the existing structure within the group.
Research has also found that quite a few promoters love to think and force others to think that they are simply indispensable. For, nothing — just nothing — gives them more pleasure than the thought that the organisation would crash after they leave. After all, there can’t be any better evidence of your brilliance than the falling apart of the company after you’ve left. Some believe in their indispensability so much that they simply refuse to leave — even if that means repeatedly increasing the retirement age of the entire board.
So it’s no surprise that India Inc has had a mixed record in attracting and retaining high-quality professional talent from the outside. According to a white paper brought out by global executive search firm Egon Zehnder, timing is an all-important question. The first step is for the entrepreneur to realise that a different leader is required for the future journey. Symptomatically, this is often the stage when an organisation’s progress is visibly slowed down by the lack of formal structures, systems and processes. Going external might also be an imperative if there is a sudden shift in the sectoral domain and/or the geographical footprint, which might necessitate a certain set of skills that is not available in the current team.
However, this alone is not sufficient, Egon Zehnder says. The expectations also should be realistic. Often, promoters expect the professional to have a magic wand to set things right overnight. And when that doesn’t happen, impatience creeps in, leading the professional CEO to a pressure-cooker situation.
There are examples galore of how the abrupt departures of professional CEOs have destroyed the employer-brand of the organisation forever.
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper
